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Tales From The Future
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I look at value and contrarian ideas as well as emerging technologies worldwide, both on the long and short side. I also like to discuss the influence of monetary policy on stock markets. I usually do not engage in short-term trading and myopic analysis (quarter by quarter, without looking at... More
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  • Casual Gaming: ZNGA, GLUU... - Update: King IPO 2 comments
    Feb 18, 2014 3:17 PM | about stocks: ZNGA

    King is soon filing for an IPO. A revenue comparison to two other big mobile game companies:

    As the WSJ writes (and I also outlined in earlier blogs on the subject):

    King will likely face investor questions about what differentiates it from Zynga, and how it can continue to match the fickle tastes of mobile gamers.

    In its filing, King acknowledged "a small number of games currently generate a substantial majority of our revenue." Specifically, in the fourth quarter of 2013, its top three games-Candy Crush, "Pet Rescue Saga" and "Farm Heroes Saga"-accounted for 95% of its total gross bookings, it said. Candy Crush, in particular, accounted for 78% of its total gross bookings.

    online.wsj.com/news/articles/SB100014240...

    This revenue concentration and outlook is similar to the movie business - few products with huge hit/miss variances. No company has a secret sauce for the next hit (luck and timing involved) and only very few mobile games can be turned into long-lasting and easier-to-predict franchises (Angry Birds from Rovio is the exception to the rule in the space).

    The valuations in the mobile gaming space continue to be very rich compared to "traditional" game console companies - KING valued at ZNGA revenue multiples would result in a market cap of close to $10 billion!

    Hmmm.....I won't touch this on the long side.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Additional disclosure: I may go short ZNGA or KING in the future (not short-term) depending on valuation and outlook.

    Themes: casual gaming, mobile games Stocks: ZNGA
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  • Tales From The Future
    , contributor
    Comments (4113) | Send Message
     
    Author’s reply » An interesting blog entry from Felix Salmon on the KING IPO:

     

    http://reut.rs/1cwmjH2
    12 Mar, 03:10 AM Reply Like
  • Tales From The Future
    , contributor
    Comments (4113) | Send Message
     
    Author’s reply » Another good article on the perils of the KING IPO and casual game monetization / one-hit wonders:

     

    The I.P.O. is no surprise, given King’s domination of the booming mobile-game business, but it’s likely to end badly, because King is part of a venerable tradition: the one-hit wonder. Like Coleco, with Cabbage Patch Kids, or Ty, Inc., with Beanie Babies, King’s business is dependent on its one star product; although the company has more than a hundred titles, almost eighty per cent of its revenue comes from Candy Crush. King has done a great job of making money from the game, and of keeping it fresh, but Candy Crush is still a fad, and, like all fads, it will fade. Indeed, as King’s filing makes clear, the number of people who pay for the game has already begun to taper off, as have sales and profits.

     

    http://nyr.kr/1fUiufs

     

    PS: I wrote similar things in an earlier Instablog entry discussing the sector:

     

    http://seekingalpha.co...
    12 Mar, 04:32 PM Reply Like
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